25th Nov. 02, The Financial Express

The Financial Express

New Delhi, November 25: India will require thrice as much foreign direct investment (FDI) as the current level in order to address its huge development agenda. The issue needs deeper study, according to Mr. Pradeep S Mehta, secretary-general, Consumer Unity and Trust Society (CUTS). Mr Mehta was speaking at a seminar on Investment for Development in Asia-Pacific Region which concluded here on Monday

Summing up the outcome of the conference, organised by CUTS, Mr Mehta said that conference heard the views of Mr. Karl Sauvant, director, investment, technology and enterprise, UNCTAD Mr Christian Rogg, investment climate and competition team, Department For International Development (DFID), London and Mr. SN Menon, additional-secretary in the commerce ministry in charge of WTO matters, on the controversial issue of having a multilateral investment agreement (MAI) under the WTO aegis.

Mr. Menon held “an extreme view” on MAI and questioned the wisdom of having such an agreement when it was not clear whether it would have any impact on increasing FDI flows into developing countries. Pointing out that the disinvestments programme had been moving slowly, Mr. Sanjeev Ahluwalia, joint secretary in the disinvestments ministry, noted that there “has been no consensus on how to go about achieving the objective of increased investment.” There was, however, a consensus that the private sector was more efficient than the public sector and that it would raise productivity.

On the other hand, Mr. Elgin emphasised that multilateral rules would reduce risks for investors. However, India like other developing countries, was concerned that the agreement would include the free flow of short-term financial flows.

Mr Mehta said that the work on investment at the World Trade Organisation (WTO) was to be seen in the context of overall bargain that was being struck and trade offsets between concerns.

Delegates including representatives of civil society, international organisations and government discussed FDI policies, practices and trends. The delegates were from India, Nepal, Bangladesh, Indonesia, the Philippines, Japan, Malaysia and FIJI from Asia; and Brazil, Hungary, Tanzania, Zambia, Kenya and South Africa from the non-Asian region.

The seminar was held as part of the project on investment for development which studies investment regimes in developing countries and the relationship with the overall national development work. The project is being implemented by CUTS and supported by DFID and UNCTAD.

Delegates agreed that FDI should be regulated by good pre-active laws if it was to contribute to national development. Mr. Sauvant felt that FDI which was an important factor influencing economic development in the Third World was nevertheless a “complex” issue and needed careful study, adding that FDI was only complementary to domestic investment.